UK businesses shunning China as international tensions rise

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British companies are pulling away from China as international tensions rise, the head of the country’s leading industry group has said.

Companies are cutting ties with China, the head of the Confederation of British Industry (CBI) he said in an interview published on Saturday, in a move that is likely to shoot up inflation in the UK.

“Every company I speak to at the moment is committed to rethinking their supply chains … because they foresee our politicians inevitably accelerating towards a world decoupled from China,” said CBI director general, Tony Danker, in the Financial Times newspaper.

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China was the UK’s largest source of imported goods in 2021, accounting for 13% of the total, while it was the sixth largest destination for goods exports, according to official UK trade statistics.

However, British security concerns have increased in recent years, fueled by disagreements with China over Hong Kong and other issues. Last week, the head of Britain’s foreign intelligence service, Richard Moore, said China was now his top priority, ahead of counter-terrorism work.

The UK has also increasingly blocked Chinese takeovers of companies on national security grounds.

The two remaining Conservative Party leadership candidates – Foreign Secretary Liz Truss and former finance minister Rishi Sunak – have said they intend to take a harder line on China.

Danker said growing US concerns about China had also made British companies more wary of relying on Chinese suppliers, and that going elsewhere would be “more expensive and therefore inflationary”.

“It doesn’t take a genius to think that cheap products and cheaper products can be a thing of the past,” he added.

British inflation hit a 40-year high of 9.4% last month, partly due to rising energy prices caused by Russia’s invasion of Ukraine.

Reuters with additional editing by Sean O’Meara

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Sean O’Meara

Sean O’Meara is editor of Asia Financial. He has been a journalist for over 30 years, working on local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.

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